What is DeFAI (Decentralized Financial Artificial Intelligence)?

Original title: " What Is DeFAI (Decentralized Finance Artificial Intelligence)? "

Original author: Sankrit K

Compiled: Scof, ChainCatcher

Key points:

• DeFAI is a new Web3 concept that brings the advantages of artificial intelligence into the field of decentralized finance (DeFi).
• DeFAI uses artificial intelligence to make decentralized finance more user-friendly through natural language instructions and personalized strategies.
• Unlike goal-centric robots (automated pre-ordered results), DeFAI prioritizes decision-making guided by AI.
• By mimicking familiar interfaces such as chatbots, DeFAI bridges the gap between natives and newbies in the crypto space.

Since the advent of AI agents, "crypto" and "artificial intelligence" (AI) have become hot words and headlines in every population. Together with blockchain technology, they form the innovative trinity that could shape the technological landscape of this decade.

Mark Zuckerberg predicts that there will be more artificial intelligence agents in the world in the future than humans. And blockchain happens to be the ideal environment for these AI agents to flourish—licensed, trustless, tamper-proof and transparent.

DeFAI - The integration of decentralized finance and artificial intelligence is a new crypto-narration that bridges the accessibility gap in decentralized finance (DeFi) through artificial intelligence.

This article will explore DeFAI's narrative in detail and outline some popular projects that have been innovative in this segment.

Enter DeFAI (Decentralized Finance + Artificial Intelligence)

DeFAI (Decentralized Finance + Artificial Intelligence) is a way to integrate artificial intelligence (AI) into a decentralized finance (DeFi) system, aiming to improve efficiency, accessibility and user experience.

DeFi is a paradigm for a thorough rethinking of how financial systems and investment tools work. It is completely trustless and intermediary; this is almost impossible in most traditional financial scenarios.

However, one disadvantage of DeFi is that it is too difficult for ordinary users and has a steep learning curve.

For many, the empowerment promised by DeFi is often overshadowed by the challenges of managing risks, interpreting complex data, and staying ahead in the 24/7 market. Users are often confused: How can they take full advantage of DeFi’s potential without falling into its complexity?

On the other hand, artificial intelligence (AI) has significantly demonstrated its potential in simplifying decision-making and optimizing processes across industries.

Therefore, the overall goal of DeFAI is to apply artificial intelligence-based solutions to DeFi projects, abstracting technical details and making on-chain interactions more friendly to non-technical users.

DeFAI can provide real-time insights, automated transactions, personalized strategies and efficient decision-making, all without the burden of technical details from users.

The common feature of current DeFAI-based applications is that users can perform complex DeFi operations through simple, human-like commands without in-depth technical knowledge.

DeFAI vs. Crypto AI Agent vs. AI Meme Coin

In the narrative of encryption and artificial intelligence, multiple categories have emerged. Due to their similarity, most people cannot distinguish them. The difference is often in the subtleties and can only be revealed after careful observation.

AI Meme coins usually rely on hype without substantial functionality; encrypted AI agent projects are usually targeted at specific application scenarios; while DeFAI adopts a way to make the on-chain financial ecosystem more accessible to the public.

The following table can help you better understand these differences.

How is DeFAI different from intention-centric blockchains?

At first glance, DeFAI and intention-centric blockchains or projects seem similar, as they both focus on improving user experience and system efficiency.

However, after in-depth analysis, DeFAI and intention-based architectures are fundamentally different. They vary in design concepts, implementation methods, and the scope of the problem they solve.

Similarities

On the surface, both DeFAI and intention-centric blockchain are designed to simplify user experience and increase the efficiency of the blockchain ecosystem. They all try to abstract the complexity of on-chain interactions, allowing users to focus on desired results rather than complex technical details.

But the similarities only end here.

the difference

DeFAI currently mainly uses machine learning algorithms and large language models to simplify the interaction between humans and blockchain. On the other hand, intention-centric blockchains focus on the concept of “intention”, where users express their expected results, and systems usually use “solvers” to find the best path to achieve this goal.

You can think of the solver as a dedicated module in an intent-based blockchain that translates the user's intent into executable on-chain operations. For example, if a user wants to exchange tokens or transfer assets across chains, the solver will determine the best path and execute the corresponding transaction based on factors such as gas expenses, slippages and liquidity.

DeFAI handles problems in different ways. Instead of focusing on the infrastructure needed to execute intentions, it leverages AI to help users make better decisions before they execute. DeFAI's AI model analyzes on-chain data, predicts market trends, and recommends actions based on user's goals (e.g., selecting the best liquidity pool to provide liquidity, or optimizing asset allocation for earnings farming).

It should be emphasized that when referring to the suggestions of DeFAI agents, users still need to conduct their own research.

Example: Exchange tokens

Let's take the exchange token as an example and see how each approach is handled.

Intent : Exchange tokens across blockchains

• DeFAI will use AI algorithms to provide users with real-time suggestions:

Step 1 : User input: "I want to exchange USDC with 1 ETH."

Step 2 : DeFAI analyzes the on-chain data, including DEX price, liquidity pool, gas charges and bridging charges.

Step 3 : It will suggest the best route, such as swapping ETH to USDC on Uniswap via Ethereum, and then bridging USDC to Polygon to reduce gas charges.

Step 4 : The user executes the suggested transactions through semi-manual means or through the connected wallet interface.

Here, DeFAI serves as an intelligent assistant to help users make informed decisions while giving final execution control to users.

• A blockchain centered on intent , the process is more automated:

Step 1 : User input: "Swap USDC with 1 ETH."

Step 2 : The system captures the intent and passes it to the solver.

Step 3 : The solver determines the optimal path, which may involve splitting transactions into multiple DEXs, reducing costs with Rollup, or combining exchanges and bridges into a single operation.

Step 4 : The blockchain performs transactions on behalf of the user, sending USDC to its wallet without further input.

Here, users interact only at the intent level.

DeFAI use cases

Personalized financial strategy

Artificial intelligence is good at learning from input data (training sets) and generating tailored outputs. If this data is your trading history, investment model and risk tolerance, the DeFAI application can create highly personalized financial strategies.

For example, suppose an AI-powered DeFi application analyzes your on-chain activity and finds that you frequently interact with stablecoins. Based on this, it may recommend high-yield stablecoin staking platforms.

Projects like Mozaic Finance are already working in this direction to help users dynamically allocate funds to maximize returns and manage risks.

Pledge Verifier Choice

Pledge is a popular (and mostly safe) way to obtain guaranteed returns through pledging assets. However, this benefit is guaranteed only if the validator you entrusts honest and performs well. Choosing the wrong validator may result in a reduction in rewards, or in some cases, may face penalties like “cutting.”

Choosing one of the many validators is a difficult task, and naturally, it is a problem that can be handed over to AI.

DeFAI applications like HeyElsa can analyze multiple validators when requests are received, evaluating important metrics such as uptime and reputation. For example, if a user asks HeyElsa to pledge their assets, the system intelligently compares the validators and selects the one that best matches the user's preferences.

Natural Language Portfolio Management

With thousands of tokens on each blockchain, tracking investments is becoming more and more complex for retail crypto investors. Short-term trends, Meme tokens and airdrops often lead to over-diversity of portfolios, making asset management difficult.

DeFAI solves this problem by introducing natural language portfolio management, allowing users to interact with their portfolio as easily as sending messages.

Imagine that you simply show your needs to the app—such as “Show my best performing token this month” or “How many assets in my wallet are worth less than $1”—and then the app will output it easily The accurate result of understanding.

Platforms like HeyElsa and Griffain implement this functionality by combining AI and blockchain. They are able to interpret user commands, analyze on-chain portfolios, and perform request operations on the DeFi protocol in a chat-like interface.

Similarly, SoDAS (Solana DeFi Agent Swarm) integrates messaging platforms such as Telegram and Discord, allowing users to manage their portfolios through conversations and interactions.

Target-based trading method

Trading cryptocurrencies requires a firm mindset. Although your strategy may be well thought out, emotions tend to prevail when acting – a common problem for most investors.

Watching moments of price fluctuations often lead to impulsive decision-making. DeFAI applications can eliminate emotional bias to a large extent or even eliminate them completely by automating trading strategies around specific goals.

Loomix platforms like LogX are leading this field. Users can define specific financial goals, such as "if the price of ETH falls below $3500, sell 50% of ETH to reduce losses, or sell at $4000 to lock in profits", and then Loomix's AI algorithm will automatically perform these Strategy.

Another example is Aspis, which provides an AI-powered funding pool tailored to specific financial goals. For example, you can instruct the system to allocate funds to achieve a 20% gain and set a 5% risk cap. AI agents within Aspis will dynamically adjust these strategies to adapt to market volatility and optimize performance in real time.

8 leading DeFAI projects

Here is a list of 8 DeFAI projects (in order) with a short description and some of their key features.

in conclusion

DeFi+AI redefines the relationship between autonomy and automation. Unlike intent-centric protocols that prioritize results-driven automation, DeFAI retains human decision-making power by acting as an intelligent consultant rather than an executor.

The most challenging implication of DeFAI is its potential to make blockchain more humane.

DeFAI has the potential to catalyze a new era in which blockchain transcends its traditional segments by embedding intelligence into its infrastructure. The ultimate test will be whether DeFAI can scale without sacrificing the core principles of decentralization, a challenge that requires resilience in AI training transparency, recommended accountability, and resistance to algorithmic monocultures.

Although DeFAI can provide users with a more efficient and convenient way to participate in decentralized finance, be sure to do enough research on your own before investing in any capital.